Bunge Ltd. (BG), the world’s second-
largest sugar trader, said it plans to spend $2.5 billion to
boost sugar and ethanol production in Brazil over the next five
years and may sell bonds to help finance the investments.

“We are very positive on the sugar and ethanol outlook,”
Chief Executive Officer Alberto Weisser said at a press
conference in Sao Paulo. “Our investments come at the right
moment, as the world is yearning for food and clean energy.”

Bunge plans to invest the cash between next year and 2016
to boost capacity at eight mills in Brazil, the world’s largest
sugar producer and exporter. The plan will boost sugar-cane
crushing capacity to 30 million metric tons a year from 21
million tons, according to the White Plains, New York-based
company. Sugar and ethanol capacity will grow by almost half.

Sugar prices jumped 50 percent in the past year after a
drought and freezing temperatures in Brazil’s Center South cut
output of sugar-cane, which is turned into sugar and ethanol,
for the first time in a decade. Ethanol prices rose 11 percent.

The sugar and so-called bioenergy business are a
“priority” for the company, said Weisser, who is targeting
sales growth of 8 percent to 10 percent a year over the next
five years, the fastest among all the four areas where Bunge is
active. The others are fertilizer, food & ingredients and
agribusiness, according to a July 28 company presentation.

Brazil Investments

The company is investing $350 million this year in Brazil,
mostly to replant and plant new sugar cane fields, Bunge Brazil
CEO Pedro Parente said. It is planting about 70,000 hectares of
land, an area about the size of Chicago.

Bunge’s eight Brazilian mills may be further expanded to
crush 40 million tons, Parente said. “After we conclude our
current investment plan, we may consider further expanding the
mills,” he said. “Green fields are not economically viable.”

Building new mills is also not viable partly because of the
valuation of Brazil’s real, Weisser said. “It is cheaper to
produce U.S. corn-based ethanol than Brazilian cane-based
fuel,” he said.

The Brazilian real has gained 9.2 percent against the
dollar this year, the second-best performer among 17 major
currencies tracked by Bloomberg.

Bunge expects to crush about 15.5 million tons of sugar
cane this year, down from an earlier estimate of 16.5 million,
because of adverse weather in Brazil’s Center South, the world’s
largest producing region of sugar, it said.

Automobile Demand

Rising demand for automobiles in Latin America’s largest
economy, where cars run on a blend of ethanol and gasoline, is
boosting demand for ethanol. So-called flex-fuel cars account
for about 50 percent of Brazil’s fleet, according to the
country’s car manufacturers’ association, known as Anfavea. The
remainder run on gasoline.

Bunge may expand port terminals capacity in Brazil “if
necessary,” Parente said. “We are constantly analyzing the
bottlenecks of the business,” he said.